Hedging Binary Options to Maximize Your Gains

Hedging binary options is a form of binary options strategy that is often utilized by traders so that they can either offset their losses or improve their maximum gains. It is essentially accomplished by acquiring two contracts that are opposite each other in terms of movement. As binary options has a fixed payout scheme, the risk is inherently already under control because you can only lose what you have invested. However, by using hedging binary options strategies, you can even further minimize your losses this way.  Here is an explanation on how you can use the hedging binary options strategy.

The advisable time to utilize the hedging binary options strategy is when you believe that the price of the instrument that you invested in will not finish make it to your initial projection. Most of the time, there is a 10-minute period prior to the expiration time where in you are not allowed to make trades anymore, hence you have to make a decision if you want to make use of this strategy before it is too late. For example, you have initially invested in a $100 call option contract with a 75% payout. Twenty minutes before the expiration time, the value of the instrument is still not within the money so you decide to buy another $100 put option contract. Through this, you will certainly get $175, and if you consider the $200 cost of those two contracts, you only have lost $25. The $25 loss is more bearable compared to the supposedly $100 loss that you should have gotten, if you haven’t purchased those two contracts.

The hedging binary options strategy may also be utilized to earn greater profit while at the same time, minimizing your losses. This can be achieved by purchasing two opposing options that will result an in-the-money-range. To do this, place bets in two opposite directions but having strike prices that are near (but not equal to) each other. Using this strategy will allow you to earn huge gains if the price of the underlying asset lies within the range of your two contracts. Additionally, if one of your options is out of the money, the other remaining option will still be in the money, and will offset majority of the losses from the losing contract.